According to the U.S. Small Business Administration Office of the Inspector General, potential fraudsters have obtained $250 million in federal funds intended to help businesses survive the impact of COVID-19.
The Inspector General also identified $45.6 million in potentially duplicate payments and warned that with well over $220 billion left to give out, rapid changes were needed.
SBA Inspector General Hannibal “Mike” Ware published a memorandum July 28 addressed to Administrator Jovita Carranza that described “serious concerns” of potential fraud within the economic injury loan program created by the Coronavirus Aid Relief and Economic Stimulus Act.
This potential fraud is widespread within the program, the memorandum said, noting that thousands of reports of suspicious activity were pouring in from financial institutions and through the fraud hotline, including credit checks on individuals who had never applied for such a loan or grant.
The report detailed several “organized fraud rings” that use social media to recruit individuals to apply and split the proceeds with the fraudsters. Some of these schemes promise “free money” and use romance to entice applicants to unintentionally assist.
The OIG suggested that the SBA work with the financial institutions to determine the fraudulent applications and potentially prevent disbursement of the funds. Unfortunately, the SBA does not currently have a process in place to review potentially fraudulent applications.
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